Bord Gais to abandon further price rise

HOUSEHOLDS AND businesses are unlikely to face a further increase in natural gas charges next January as fossil fuel prices have continued falling on world markets.

State natural gas supplier and distributor Bord Gáis Éireann (BGÉ) last month sought the energy regulator's permission to increase its prices by 4.2 per cent, which would have added about €3 a month to the average household bill.

BGÉ's request came a month after it applied a Commission for Energy Regulation (CER)-approved increase of 20 per cent - an average of €13.75 a month - after global oil and gas prices both hit new record highs during the summer.

However, it is understood that BGÉ will not now seek the second increase as world fossil fuel prices have been falling dramatically.

At the same time, Britain has boosted imports of liquid natural gas. This has eased a supply bottleneck in the North Sea that was helping to force up prices. BGÉ imports much of its gas from the North Sea via Britain.

BGÉ supplies more than 500,000 homes and 1,700 businesses in the Republic. It has to apply to the CER for permission to raise or lower its charges.

Under normal circumstances, it makes its submission once a year in July and the regulator then makes a decision, following which any change is applied in September.

When the CER announced the first increase in July, it warned that depending on any application that BGÉ might make, it might have to raise charges further from January if world prices continued to rise.

However, they have been going in the opposite direction. Oil prices slipped to $48.20 a barrel on world markets yesterday, about $100 less than the record it hit in July.

Natural gas went the same direction, and was trading at about 63 pence a unit in London, 60 per cent off the all-time high of £1.10 it reached in midsummer.

Yesterday, International Energy Agency (IEA) chief economist Dr Fatih Birel said that world oil prices, which effectively determine energy costs in the Republic, would remain low into next year.

"There will be continued downward pressure next year, on demand first of all and therefore on the price as well," Dr Birel predicted.

He added that the global recession was likely to hit short-term demand.

However, he warned that over the long term, "the era of cheap oil is over" as it will remain one of the world's primary sources of energy for the foreseeable future.

Last week the IEA published a report stating that the world needs to find new oil fields amounting to six times the production of Saudi Arabia between 2007 and 2030 to meet its likely future demand for the fuel.

Dr Birel, who met Minister for Communications, Energy and Natural Resources Éamon Ryan and Taoiseach Brian Cowen yesterday, also said that global energy consumption needed to cut carbon emissions drastically or face the catastrophic consequences of climate change.